July 9, 2018 / 8:00 PM / 11 days ago

Brazil sees China investment slowing after soaring in year's first half

BRASILIA (Reuters) - Chinese investment in Brazil rose more than 2-1/2-fold in the first half of 2018, compared with the same period a year ago, but is expected to slow in the year’s second half because of Brazil’s presidential election in October, the country’s planning ministry said on Monday.

Chinese investment jumped to $1.54 billion in the January-to-June period, from $589 million in the same months in 2017, the Planning Ministry said in a statement.

But the amount remains far below the $20.9 billion invested in all of 2017, the second highest year on record.

This year’s investment is unlikely to catch up as Chinese firms appear to holding off on investing until 2019, when a new president is set to take over in Brazil, Jorge Arbache, vice planning minister for international affairs, said in an interview.

The presidential race, with the first-round and runoff elections both to be held in October, is considered the most wide open in years with candidates on the far ends of the political spectrum leading in the polls.

Chinese investment levels can be volatile because they often hinge on a few massive infrastructure projects. Chinese companies frequently keep their discussions closely guarded so surprise investments are not out of the question, Arbache said.

“It’s possible they would invest more than last year. It wouldn’t surprise me. But from the conversations we are having with Chinese and non-Chinese, the tendency is to postpone until next year,” he said.

Brownfield industrial and infrastructure projects continue to make up the lion’s share of investments, though there has been a recent uptick in the number of more modestly valued greenfield projects in manufacturing and services, Arbache said.

Some of the largest investments in the ministry’s bimonthly bulletin include utility China Three Gorges Corp’s investing nearly $200 million in the first half of the year to update a hydroelectric facility, and China State Grid’s CPFL Gerecao de Energia SA’s recent offer of $2 million for a government concession to build a power substation and transmission lines.

The ministry’s figures include both confirmed and announced projects and exclude deals where values were not disclosed, Arbache said.

It is looking likely that five investment projects will be approved for $2.4 billion in loans from Chinese and Brazilian state banks, said Arbache, who oversees a preferential lending program. The Brazil-China Cooperation Fund established to direct $20 billion in financing gave the initial greenlight to the projects earlier this year, and they are currently being vetted by banks.

A new batch of three projects is set to be considered later this month, he said, declining to name them.

Reporting by Jake Spring; Editing by Leslie Adler

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